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The Dynamo and Big Data

some economists questioning whether Big Data will ever have the impact of the first Internet wave, let alone the industrial revolutions of past centuries.

OK, we’ve been here before; there was a lot of skepticism about the Internet too — and I was one of the skeptics. In fact, there was skepticism about information technology in general; Robert Solow quipped
that “You can see the computer age everywhere but in the productivity statistics”. But here’s another instance where economic history proved very useful. Paul David famously pointed out (pdf) that much the same could have been said of electricity, for a long time; the big productivity payoffs to electrification didn’t come until after around 1914.

Why the delays? In the case of electricity, it was all about realizing how to take advantage of the technology, which meant reorganizing work. A steam-age factory was a multistory building with narrow aisles; that was
to minimize power loss when you were driving machines via belts attached to overhead shafts driven by a steam engine in the basement. The price of this arrangement was cramped working spaces and great difficulty
in moving stuff around. Simply replacing the shafts and belts with electric motors didn’t do much; to get the big payoff you had to realize that having each machine powered by its own electric motor let you
shift to a one-story, spread-out layout with wide aisles and easy materials handling.

David predicted that IT would similarly deliver its big payoff with a lag, as people figured out how to use it; and so it proved (pdf).

There’s every reason to believe that the story for Big Data will be similar. Now, that doesn’t mean that it will be the equivalent of electricity or the steam engine; the Internet wasn’t. But it
could, nonetheless, be pretty Big. Have patience.